For more than two years, we have witnessed the economic demise of certain European countries. This soon led to the financial community systematically assessing the health of several peripheral southern European countries, followed by tumbling investment grade ratings and spikes in required rates of return on the government debt of these sovereigns. As the European Central Bank continues to dole out rescue packages, many are now looking for the next country to suffer a financial attack and wondering if the euro will even survive.

Some analysts feel that Spain is the last bastion for the euro. We do not. We believe that the final battle will be fought on the picturesque shores of Italy, resulting in Rome’s emergence as either hero or villain with respect to the survival of the euro. Most European politicians dearly want the “run” on several of its “club” members to end and its rescue to restore confidence. This is, unfortunately, a dream that is likely to be shattered as the next domino – Spain – suffers the scrutiny of intense solvency analysis.

Spain, which has almost twice the amount of government debt outstanding as Greece, has well-known infirmities – namely an anaemic economy, an unemployment rate over 20 per cent and a devastating real estate debacle and consequent banking crisis. The need for a potential bail-out of Spain is not only possible, but likely and manageable even with the mounting aggregate debt assumption by the other, stronger euro partners, its central bank and the International Monetary Fund.